Debt consolidation offers a borrower an appropriate platform to put all of his or her debts into a single account,such that a worsening debt situation is reversed completely.With only one outstanding loan,the borrower is better able to have focus and address his or her financial situation with the zeal it deserves.Other variations of debt cosolidation include debt arbitration,debt negotiation,and debt settlement.
However,a worsening debt situation does not occur overnight.It is not a spontaneous event.
Rather,it is an accummulation of events,spanning a short or long period of time as the case may be.My question is this:why you should anyone care less about his or her finances?If you care to take your bath daily,brush daily,eat daily if it is possible,why then should you not care about your finances,your accummulated debts.Afterall,you make them to be,knowing surely well that someday,the lender will come banging at your door.
Good management practises are vital to financial freedom.A borrower that is worth his or her salt should be able to take the right decision on time.Signs would have present themseves as clues to the fact that things are really not going well and something urgent needs to be done.Your personal monthly financial record is a vital tool to tracking your finances.Having regular discussion with a financial counselor is also part of it.
So,when is the right time to to go for debt consolidation?There are three main situations that could shed the light for the right thinking borrower to have the right lead,and these are listed below :
1.Charged-off account
Your inability to make one or two regular payments is suggestive of what the lending company will do to your bank account.Thus,when your bank account remains at a negative balance for a significant length of time,the lending company will close the account and charge-off the negative balance.The lender will then find a collection agency to help recover the funds from you.
2.Few months behind payment
Once you are few months behind payment,you should know your creditors may not continue to tolerate your silence or inability to come forward with cash dues.So,what may likely happen is that your creditor might agree to reduce 40-60 percent of the original debt amount.
3.A litigation is ahead
Once you have defaulted,for several months,the lending company discusses the case with her attorney to fashion out a litigation process against you.A summon is sent to you,at which time you may not be able to higher the service of settlement company to work with you.However,out -of -court settlement may be possible if you move quick to consult certain law firms and attorneys.
Types of debt consolidation
Debt consolidation may be secured or unsecured.With a secured debt consolidation,it is taken that you own a home,vacation property,or a real estate that can be used as collateral.You may then qualify for a first or second mortgage,home equity loan,or refinance of an existing mortgage to consolidate your debt.Your rates on secured loans are lower,you have the ability to borrow more money,smaller monthly payments,longer repayment terms,and risk of losing your house if you default.
The case of an unsecured debt consolidation is for a lender without a real property.The person may qualify for personal loans that can be used to consolidate debts.With an unsecured loan,you don’t risk your asset,but there is shorter payment terms,higher monthly payments,and higher interest rates.
Advantages of a debt cosolidation move
Choosing to tackle your debt problem by debt consolidation is a step in the right direction.There are several benefits to get from such a move,including a lower monthly payment,reduced interest rates,late fee waiver,elimination of collection calls,avoidance of bankruptcy,one monthly payments,and becoming debt free.
Disadvantages of a debt consolidation move
The fact that you now have only one account should not preclude the reality that several accounts sum up to give the single one.The debt still remain as heavy as it was before the consolidation process.Again,the new financial organization may not be as flexible as the previous credit card companies.Any attempt for you to default again will be treated with severity.This is a very important point to note.
On a last note,it is up to you to steer your canoe in the right direction.While it is a good idea not to spend more than what you can chew,experience has shown that life does not really present itself that easy to comply with the rule.So,it is easy,without plan, to have a list of soaring debts around the corner.But with good management practises,an individual can easily pinpoint the most ideal time to enter a debt consolidation scheme.And the earlier that is done,the better for your finance.